Loblaw’s Digital Sales Surge 280%, Passing $1.2 Billion in 2020

Need to Know

• The grocer saw a massive surge in digital sales, amounting to $895-million for Q2, an increase of 280% year-over-year.
• Loblaw’s year-to-date e-commerce sales now amount to $1.2 billion. In 2019, it took the grocery chain the entire year to hit just over $1 billion.
• “We are on a run rate of [digital] sales that we did not expect for years,” Loblaw president Sarah Davis said.
• Digital pharmacy volume also doubled over Q2 as more Canadians accessed medicine and therapy needs remotely, tapping into partnerships with Maple and SilverCloud.

Analysis

While many retailers continue to report spikes in digital sales during the COVID-19 pandemic, Canadian grocery giant Loblaw has hit a massive e-commerce milestone, reporting an increase in online sales of 280% for Q2 of 2020, with year-to-date digital sales for the company now amounting to a whopping $1.2-billion.

Loblaw, which owns the Shoppers Drug Mart pharmacy as well as several grocery brands including No Frills and Zehrs, took the entirety of 2019 to hit just over the $1-billion digital sales mark, so surpassing that benchmark by this point in 2020 is a significant milestone for the company.

“We are on a run rate of sales that we did not expect for years,” Sarah Davis, Loblaw’s president, said of the $1.2 billion digital sales mark, adding that “tripling e-commerce sales years ahead of plan brought incremental costs to the business. We scaled every aspect of our PC Express offering from labor, to technology, to micro fulfillment centers.”

In addition, Loblaw reported that its digital pharmacy volume has doubled, with the use of patient-physician video services “up 10 times what we would have seen pre-COVID,” according to Davis. The company invested in primary care and mental health care infrastructure with SilverCloud and Maple in March 2020, and is now seeing those investments pay off.

“Those [partnerships] resulted in more than half a million Canadians who actually went on to see those services,” Davis said in an earnings call.

While Loblaw reported a massive surge in digital sales, the company also saw a dip in overall profits for Q2: the company reported that figure at $126-million—a dip of 40.9% — compared to $213-million in the same period last year. The company reported that it incurred $210-million in pandemic-related costs during the quarter ending June 13, including investments in upgraded e-commerce capabilities—such as the investment Davis mentioned in moving Loblaw’s online-ordering platform to Google Cloud and others relating to micro-fulfillment centers. 

“Moving our online grocery site to Google Cloud Platform gave us a 4x performance increase and the capacity to handle up to 3 times the traffic; and we can scale up at any time,” Hesham Fahmy, VP of technology at Loblaw said regarding the move to Google Cloud.

Loblaw has been working to improve its digital capabilities for some time, and those investments have been continually paying off for the grocery chain. The company’s continual investment in digital infrastructure—including the aforementioned Google Cloud migration—means the company is well primed to continue surpassing its own digital benchmarks as 2020 progresses.